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Honohan: Hero of the Hour

IF Brian Cowen had a shotgun in his hands last Thursday morning, at whom would he have taken aim?

At Enda Kenny, leader of the opposition, the favourite to succeed him?

At Sean Power, his former Minister of State, who had launched a broadside against the Government in the Dail chamber just 12 hours earlier?

Or would he have taken a last stand against the IMF invaders from Washington, as they made their assault on the fortress of the Department of Finance in Dublin’s Merrion Street?

Cowen was under siege from political opponents within and without. Spared from execution by his political allies at home, he was about to be imprisoned by foreign forces. He was surrounded. If he had one shot left, guess who he would have blasted with both barrels?

None of these. Not even his heir apparent, Brian Lenihan. No, the Taoiseach would have blown his own chosen chief financier into kingdom come. On Thursday’s Morning Ireland, he was ruthlessly exposed by Central Bank Governor Patrick Honohan.
Cowen must have longed for the days when governors remained aloof from the fray. Invariably in the past, the governor’s gig was filled by the top mandarins from the Department of Finance, men destined for Dame Street armed with doctorates in deference and secrecy.

Not Honohan. He has a doctorate in economics. On Thursday morning, the most enlightened governor in the history of the State spilled the beans.

Cowen should first be congratulated on a wise choice. Honohan is a godsend to the nation. He is absolutely independent of his patron. His interview on Morning Ireland was an aberration for a top civil servant. He opened up and told the Irish people the unvarnished truth. Happily, he has not been a civil servant long enough to be infected by the doctrine of secrecy.

Here was an academic, straight out of an ivory tower, telling the nation the practical truth, a process apparently impossible for the plain people’s elected ministers. Politicians, heads high up in cloud cuckoo land, had been putting an absurd gloss on a nation’s historic humiliation. Honohan, safely embedded in his governorship, told the people: the IMF is now in charge.

Patrick dropped the Government deep in the manure. From the sanctuary of Frankfurt, he told RTE that the Government would be forced to accept a multi-billion euro loan from the IMF and Europe.

And for the first time, Honohan admitted the unutterable: deposits had been pouring out of Ireland in recent months.

The game was up. The governor had spoken.

Later that day, Brian Cowen was livid.

The Taoiseach did not welcome the governor’s entry into the arena . He coldly told the Dail that Patrick was “entitled to give his view” of the talks with the IMF.

Cowen must rue the day that he agreed to the nomination of Honohan. The governor has gone walkabout; Paddy the protege is not playing the patriot game.

Instead, he is telling the nation the truth. A foreign concept which he must have picked up through making too many trips to visit those crusty German central bankers.

Someone had to stop treating us like mindless imbeciles.

All last week, the Government was in denial. On Sunday, Dermot Ahern, a pretender to Cowen’s throne after he loses the next election, described the stories of a bailout as “fiction”. Senior cabinet colleague Noel Dempsey — standing beside him — nodded agreeably for the cameras. At 5pm on Wednesday the word went out in Leinster House that Cowen was finally about to take the nation into his confidence. Billed to make a state-of-the-nation speech to the Dail, he disappointed — mouthing utterly empty words to an expectant chamber and an anxious people.

Government spinners loftily suggested that “negotiations” had opened with the IMF. They were the negotiations of a prisoner manacled to his jailer.

The Minister for Finance was nominated to lead the Irish team. Those in the green jersey should all carry a white flag on to the pitch. Whatever the IMF’s prescription, we will have to swallow it. We are in no position to “negotiate” anything. This is a diktat.

The truth is that the Irish banks have been haemorrhaging deposits, that the Irish Government has lost the confidence of overseas investors and is no longer able to deliver on the bank guarantee without outside help.

Ministers continued to waffle about the problems being of a “structural” nature, pleading that their economy with the truth earlier in the week had been an effort to protect the taxpayer. Sean Power had been right: we were being treated like idiots.

Why was it left to a Trinity professor — a man without a popular mandate — to enlighten us?

Luckily the masses had not yet begun to vote with their feet, but their minds were moving in the same direction. All last week, familiar fears of punters on the ground about their savings were creeping back to levels not seen since the crisis in September 2008. The question on every ordinary citizen’s lips was the same: is money safe in the Irish banks?

Senators and TDs were being asked by constituents whether they should send their money abroad.

One high earner (a household name) told me that he was taking the first two days of last week off, going to Switzerland, Sweden and Germany to open bank accounts. He had spent 10 years earning his nest egg. No reckless government was going to squander it.

It was worse than 2008. On that occasion, the Government pre-empted a disaster by giving all punters a blanket guarantee on deposits, temporarily calming the impending storm.

Last week, it was more ominous: savers were asking the same question, even with a government guarantee intact. Ordinary citizens had lost faith in the State’s solvency. Their guarantee was worth buttons.

Even the European Central Bank was beginning to panic. Irish banks were losing money as deposits fled; foreign banks were refusing to provide them with funds; the reluctance of the ECB to forward any more cash beyond the terrifying €90bn already committed, forced the Irish Central Bank to print money.

The governor knew the score. He went public. His decision to deliver a truthful message to the Irish people on Thursday, that an IMF package was on the way from Washington, contrasted starkly with the words of his political masters.

Meanwhile, Cowen was still insisting that there was no question of “loss of sovereignty” for Ireland.

The Taoiseach went on — despite the presence of the IMF camped in Merrion Street — to insist that the talks with the invaders were about protecting the euro and dealing with serious market conditions that were affecting all countries.

The perverse line was even being peddled that Ireland was doing Europe a big favour.

Wait for it, the “negotiations” will be presented as a great triumph, especially if we escape without losing out to Franco/German demands to increase our 12.5 per cent corporation tax rate, the anchor of our economic future.

A big, loud thank you to Patrick Honohan. And a whispered welcome to the men from Washington.